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National CineMedia(NCMI) - 2023 Q2 - Quarterly Report
2023-08-01 20:18
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________ FORM 10-Q ____________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 2023 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33296 ____________________________________________ ...
National CineMedia(NCMI) - 2023 Q1 - Quarterly Report
2023-05-09 21:05
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________ FORM 10-Q ____________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 2023 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33296 ___________________________________________ ...
National CineMedia(NCMI) - 2022 Q4 - Annual Report
2023-04-13 12:12
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________________ FORM 10-K __________________________________________________________ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission file n ...
National CineMedia(NCMI) - 2022 Q3 - Earnings Call Transcript
2022-11-08 02:40
National CineMedia, Inc. (NASDAQ:NCMI) Q3 2022 Earnings Conference Call November 7, 2022 5:00 PM ET Corporate Participants Dan Dorenkamp - Finance Director Tom Lesinski - Chief Executive Officer Ronnie Ng - Chief Financial Officer Conference Call Participants Eric Wold - B. Riley Jim Goss - Barrington Research Operator Good day, and welcome to the National CineMedia, Inc. Q3 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Dan Dor ...
National CineMedia(NCMI) - 2022 Q3 - Quarterly Report
2022-11-07 21:13
PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity statements, with detailed notes on business and accounting policies - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information and SEC rules[30](index=30&type=chunk) - The company operates as one operating and reportable segment: advertising[31](index=31&type=chunk) - Management's plans to address going concern issues include amending credit facilities, seeking waivers, or obtaining additional debt financing, but success is not assured[35](index=35&type=chunk) [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$775.4 million** by September 29, 2022, while total liabilities increased to **$1,229.2 million**, primarily due to short-term debt Condensed Consolidated Balance Sheet Data (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $73.5 | $101.2 | | Total current assets | $137.3 | $158.4 | | Total non-current assets | $638.1 | $659.0 | | **TOTAL ASSETS** | **$775.4** | **$817.4** | | Total current liabilities | $290.2 | $69.8 | | Total non-current liabilities | $939.0 | $1,131.1 | | **Total liabilities** | **$1,229.2** | **$1,200.9** | | Total equity/(deficit) | $(453.8) | $(383.5) | | **TOTAL LIABILITIES AND EQUITY/(DEFICIT)** | **$775.4** | **$817.4** | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported a consolidated net loss of **$76.3 million** for the nine months ended September 29, 2022, an improvement driven by increased revenue to **$157.5 million** Condensed Consolidated Statements of Income Data (in millions) | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $54.5 | $31.7 | $157.5 | $51.1 | | Total Operating Expenses | $58.7 | $50.4 | $178.7 | $127.7 | | Operating Loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | | Total Non-Operating Expenses (Income) | $17.5 | $14.8 | $55.1 | $45.8 | | Loss Before Income Taxes | $(21.7) | $(33.5) | $(76.3) | $(122.4) | | Consolidated Net Loss | $(21.7) | $(33.5) | $(76.3) | $(122.4) | | Net Loss Attributable to NCM, Inc. | $(8.9) | $(15.2) | $(34.8) | $(57.3) | | Basic Net Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | | Diluted Net Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly decreased to **$36.7 million** for the nine months ended September 29, 2022, resulting in a **$27.7 million** decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Data (in millions) | Metric | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Consolidated net loss | $(76.3) | $(122.4) | | Net cash used in operating activities | $(36.7) | $(92.5) | | Net cash used in investing activities | $(2.0) | $(3.6) | | Net cash provided by financing activities | $11.0 | $25.9 | | Change in cash and cash equivalents | $(27.7) | $(70.2) | | Cash and cash equivalents at end of period | $73.5 | $110.1 | - Non-cash financing and investing activities included the purchase of an intangible asset with NCM LLC equity of **$10.4 million** in 2022 and **$14.1 million** in 2021[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Equity/(Deficit)](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity%2F(Deficit)) Consolidated equity/(deficit) for NCM, Inc. decreased to **$(453.8) million** by September 29, 2022, primarily due to net loss and cash dividends Consolidated Equity/(Deficit) Data (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Total NCM, Inc. stockholders' equity/(deficit) | $(564.8) | $(526.7) | | Noncontrolling interests | $111.0 | $143.2 | | **Total equity/(deficit)** | **$(453.8)** | **$(383.5)** | - Cash dividends declared decreased from **$0.15 per share** in 2021 to **$0.11 per share** in 2022[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the financial statements, covering business, accounting policies, revenue, loss per share, intangible assets, related parties, borrowings, and subsequent events [Note 1. The Company](index=9&type=section&id=Note%201.%20The%20Company) NCM operates the largest cinema advertising network in the U.S. but faces substantial doubt about its ability to continue as a going concern due to maturing debt and covenant non-compliance - NCM operates the largest cinema advertising network in the U.S.[27](index=27&type=chunk) - The weighted average remaining term of ESAs with founding members is approximately **17.0 years**, and with network affiliates is **15.1 years** as of September 29, 2022[28](index=28&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern due to **$217.0 million** in revolving credit facilities maturing on June 20, 2023, and expected non-compliance with financial covenants for March 30, 2023[35](index=35&type=chunk) - Management plans to amend credit facilities, seek waivers, or obtain additional debt financing, but success is not assured[35](index=35&type=chunk) [Note 2. Revenue from Contracts with Customers and Accounts Receivable](index=12&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers%20and%20Accounts%20Receivable) This note details revenue by category, including national, local, and beverage concessionaire advertising, and provides information on deferred revenue and allowances for doubtful accounts Revenue by Category (in millions) | Category | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | National advertising revenue | $39.7 | $22.6 | $116.7 | $34.3 | | Local and regional advertising revenue | $9.8 | $5.7 | $26.4 | $10.8 | | Founding member beverage concessionaire revenue | $5.0 | $3.4 | $14.4 | $6.0 | | **Total revenue** | **$54.5** | **$31.7** | **$157.5** | **$51.1** | - Revenue recognized from deferred revenue as of December 30, 2021, was **$12.0 million** for the nine months ended September 29, 2022[54](index=54&type=chunk) - The allowance for doubtful accounts for national customer receivables remained at **$0.3 million**, while for local/regional customer receivables it remained at **$1.4 million** for the nine months ended September 29, 2022[57](index=57&type=chunk) [Note 3. Loss Per Share](index=13&type=section&id=Note%203.%20Loss%20Per%20Share) This note presents the net loss attributable to NCM, Inc. and the corresponding basic and diluted loss per share, along with weighted average shares outstanding Loss Per NCM, Inc. Common Share | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss attributable to NCM, Inc. (in millions) | $(8.9) | $(15.2) | $(34.8) | $(57.3) | | Basic Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | | Diluted Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | - Weighted average shares outstanding (basic and diluted) for the nine months ended September 29, 2022, were **81,371,370**[58](index=58&type=chunk) [Note 4. Intangible Assets](index=13&type=section&id=Note%204.%20Intangible%20Assets) Intangible assets, primarily contractual rights, were assessed for impairment due to Regal's bankruptcy, with no charge recorded, but future impairment remains a risk - Intangible assets consist of contractual rights to provide services in founding members' and network affiliates' theaters[59](index=59&type=chunk) - Cineworld Group plc (parent of Regal) filed for Chapter 11, leading to Regal's motion to reject the ESA, which triggered an impairment assessment for the related intangible asset[59](index=59&type=chunk)[61](index=61&type=chunk) - No impairment charge was recorded for the Regal intangible asset as estimated future cash flows exceeded net book value, but future impairment is possible due to ongoing uncertainty[61](index=61&type=chunk) - A net impact of **$10.4 million** was recorded to intangible assets in Q1 2022 due to the issuance of **4,140,896** common membership units to founding members for added theater screens[63](index=63&type=chunk) [Note 5. Related Party Transactions](index=15&type=section&id=Note%205.%20Related%20Party%20Transactions) This note details related party transactions, including revenue and costs with founding members, and discusses mandatory distributions and amounts due to founding members - AMC's ownership was **3.5%** as of September 29, 2022, making it no longer a related party, though it remains party to key agreements[67](index=67&type=chunk) Related Party Transactions (in millions) | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Beverage concessionaire revenue | $3.9 | $2.7 | $11.3 | $4.7 | | Theater access fee and revenue share | $15.4 | $11.4 | $45.2 | $19.8 | | Selling and marketing costs | $0.1 | $0.0 | $0.1 | $0.0 | | Advertising operating costs | $0.0 | $0.0 | $0.0 | $0.1 | - Mandatory distributions of available cash to members were negative **$7.7 million** for Q3 2022 and negative **$39.9 million** for the nine months ended September 29, 2022, meaning no payment was made[73](index=73&type=chunk) - Amounts due to founding members, net, were **$11.3 million** as of September 29, 2022, primarily for theater access fees and revenue share[76](index=76&type=chunk) [Note 6. Borrowings](index=17&type=section&id=Note%206.%20Borrowings) This note details total outstanding debt, including revolving credit facilities and term loans, and discusses credit agreement amendments, distribution restrictions, and debt extinguishment gains Total Outstanding Debt (in millions) | Borrowings | Sep 29, 2022 | Dec 30, 2021 | Maturity Date | Interest Rate | | :----------------------------------- | :----------- | :----------- | :------------ | :------------ | | Revolving credit facility 2018 | $167.0 | $167.0 | June 20, 2023 | Variable | | Revolving credit facility 2022 | $50.0 | $0.0 | June 20, 2023 | Variable | | Term loans - first tranche | $259.2 | $261.2 | June 20, 2025 | Variable (6.56%) | | Term loans - second tranche | $49.4 | $49.8 | Dec 20, 2024 | Variable (10.56%) | | Senior secured notes due 2028 | $374.2 | $400.0 | April 15, 2028 | 5.875% | | Senior unsecured notes due 2026 | $230.0 | $230.0 | August 15, 2026 | 5.750% | | **Total borrowings** | **$1,129.8** | **$1,108.0** | | | - The Credit Agreement Third Amendment suspended certain financial covenants through December 29, 2022, and set new leverage ratios for subsequent quarters[82](index=82&type=chunk) - NCM LLC is restricted from making available cash distributions until after Q4 2023 compliance certificate, and only if specific conditions are met[83](index=83&type=chunk) - NCM Inc. purchased **$25.8 million** of Notes due 2028 on the open market, resulting in a **$6.0 million** gain on extinguishment of debt[91](index=91&type=chunk) [Note 7. Income Taxes](index=19&type=section&id=Note%207.%20Income%20Taxes) Income tax expense was **$0.0 million** for both periods, with an effective tax rate of **0.0%** due to a full valuation allowance on deferred tax assets - Income tax expense was **$0.0 million** for the nine months ended September 29, 2022, and September 30, 2021[92](index=92&type=chunk) - Effective tax rate was **0.0%** for both periods due to a full valuation allowance on net deferred tax assets[92](index=92&type=chunk) [Note 8. Commitments and Contingencies](index=19&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note outlines ROU assets and lease liabilities for facilities, lease costs, and the treatment of ESAs as short-term leases, along with maximum potential future payments for minimum revenue guarantees - The company has ROU assets of **$17.4 million** and lease liabilities of **$2.2 million** (short-term) and **$18.6 million** (long-term) for facilities leases as of September 29, 2022[94](index=94&type=chunk) - Total lease cost for facilities was **$1.0 million** for Q3 2022 and **$3.0 million** for the nine months ended September 29, 2022[98](index=98&type=chunk) - ESAs and network affiliate agreements are treated as short-term leases (less than one month) under ASC 842, with amortization of related intangible assets recognized as lease expense[99](index=99&type=chunk) - The maximum potential future payments for minimum revenue guarantees under network affiliate agreements is **$122.8 million** over their remaining terms[103](index=103&type=chunk) [Note 9. Fair Value Measurements](index=21&type=section&id=Note%209.%20Fair%20Value%20Measurements) This note provides the fair value of borrowings, classifies cash equivalents and marketable securities by fair value hierarchy, and reports impairment charges on certain investments Fair Value of Borrowings (in millions) | Borrowings | Carrying Value (Sep 29, 2022) | Fair Value (Sep 29, 2022) | Carrying Value (Dec 30, 2021) | Fair Value (Dec 30, 2021) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Term loans - first tranche | $259.2 | $171.1 | $261.2 | $236.4 | | Term loans - second tranche | $49.4 | $34.6 | $49.8 | $48.1 | | Notes due 2026 | $230.0 | $50.9 | $230.0 | $179.4 | | Notes due 2028 | $374.2 | $216.3 | $400.0 | $357.0 | - Cash equivalents are classified as Level 1 (**$10.7 million**) and Level 2 (**$0.0 million**), while marketable securities are Level 2 (**$1.3 million**) as of September 29, 2022[113](index=113&type=chunk) - The company recorded **$0.1 million** in impairment charges on certain investments for the nine months ended September 29, 2022[109](index=109&type=chunk) [Note 10. Subsequent Event](index=23&type=section&id=Note%2010.%20Subsequent%20Event) NCM LLC initially missed an **$11.8 million** interest payment on Senior Secured Notes but made it within the grace period, and NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable - NCM LLC initially missed an **$11.8 million** interest payment on Senior Secured Notes due 2028 on October 17, 2022, but made the payment on November 4, 2022, within the grace period[117](index=117&type=chunk) - NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable on November 3, 2022, for a cash payment equal to book value[118](index=118&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, highlighting COVID-19 and Cineworld bankruptcy impacts, liquidity management, and significant revenue growth with reduced net losses - The company operates the largest cinema advertising network in the U.S., reaching audiences through its Noovie pre-show, lobby network, and digital platforms[120](index=120&type=chunk)[122](index=122&type=chunk) - Management focuses on revenue, Adjusted OIBDA, Adjusted OIBDA margin, advertising inventory utilization, pricing, and free cash flow as key performance indicators[123](index=123&type=chunk) - The company faces ongoing challenges from the COVID-19 pandemic's impact on movie slates and attendance, and the Cineworld Proceeding involving Regal's bankruptcy[125](index=125&type=chunk)[126](index=126&type=chunk) [Overview](index=24&type=section&id=Overview) National CineMedia, Inc. operates America's largest cinema advertising network, utilizing its Noovie pre-show, Lobby Entertainment Network, and digital properties with long-term exhibitor agreements - NCM operates the largest cinema advertising network in the U.S.[120](index=120&type=chunk) - The Noovie pre-show has two formats: one with Post-Showtime advertising (**59%** of network) and the Classic format (**41%** of network)[121](index=121&type=chunk) - The company also sells advertising through its LEN, online, mobile apps (Noovie Audience Accelerator, Trivia, Name That Movie, Shuffle), and other out-of-home venues[122](index=122&type=chunk) - Weighted average remaining term of ESAs and network affiliate agreements is **15.1 years** as of September 29, 2022[122](index=122&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) The company faces ongoing impacts from COVID-19 on attendance and revenue, challenges Regal's ESA rejection in Cineworld's bankruptcy, and manages liquidity through cost controls and new debt financing - Movie slate for 2022 improved but attendance remains inconsistent and below historical levels[125](index=125&type=chunk) - Cineworld Group plc (Regal's parent) filed for Chapter 11, and Regal moved to reject its ESA with NCM LLC, which NCM LLC is contesting[126](index=126&type=chunk) - The company reduced payroll costs by **44%** and managed liquidity through cost controls and new debt financing, including a **$50.0 million** Revolving Credit Agreement in January 2022[127](index=127&type=chunk)[129](index=129&type=chunk) - The Credit Agreement Third Amendment suspended certain financial covenants through Q4 2022 and set new leverage ratios for subsequent quarters[128](index=128&type=chunk) [Summary Historical and Operating Data](index=25&type=section&id=Summary%20Historical%20and%20Operating%20Data) The company achieved significant revenue growth of **71.9%** in Q3 2022 and **208.2%** year-to-date, driven by increased theater attendance, leading to substantially reduced operating and net losses Summary Historical and Operating Data (in millions, except percentages) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | Q3 % Change | YTD % Change | | :----------------------------------- | :------ | :------ | :------- | :------- | :---------- | :----------- | | Revenue | $54.5 | $31.7 | $157.5 | $51.1 | 71.9% | 208.2% | | Total operating expenses | $58.7 | $50.4 | $178.7 | $127.7 | 16.5% | 39.9% | | Operating loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | (77.5)% | (72.3)% | | Net loss attributable to NCM, Inc. | $(8.9) | $(15.2) | $(34.8) | $(57.3) | (41.4)% | (39.3)% | | Total theater attendance (in millions) | 106.6 | 75.7 | 306.8 | 138.6 | 40.8% | 121.4% | [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted OIBDA, a non-GAAP measure, significantly improved to **$7.0 million** (12.8% margin) in Q3 2022 and **$15.2 million** (9.7% margin) year-to-date, reflecting enhanced operating performance - Adjusted OIBDA is operating income before depreciation, amortization of intangibles for network theater screen leases, non-cash share-based compensation, impairment of long-lived assets, advisor fees related to Cineworld Proceeding, executive transition costs, and sales force reorganization costs[132](index=132&type=chunk) Adjusted OIBDA Reconciliation (in millions) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :----------------------------------- | :------ | :------ | :------- | :------- | | Operating loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | | Depreciation expense | $1.5 | $2.5 | $5.1 | $8.4 | | Amortization of intangibles | $6.3 | $6.2 | $18.7 | $18.5 | | Share-based compensation costs | $2.1 | $1.7 | $5.1 | $6.5 | | Impairment of long-lived assets | $0.0 | $0.0 | $5.8 | $0.0 | | Advisor fees related to Cineworld Proceeding | $1.3 | $0.0 | $1.3 | $0.0 | | **Adjusted OIBDA** | **$7.0** | **$(8.2)** | **$15.2** | **$(43.1)** | | Adjusted OIBDA margin | 12.8% | (25.9)% | 9.7% | (84.3)% | [Our Network](index=27&type=section&id=Our%20Network) The advertising network decreased to **20,201 screens** by September 29, 2022, due to affiliate losses and net closures, though broad market coverage remains a competitive advantage Number of Screens in Network | Category | Dec 30, 2021 | Sep 29, 2022 | Change | | :------------------- | :----------- | :----------- | :----- | | Founding Members | 16,436 | 16,155 | (281) | | Network Affiliates | 4,304 | 4,046 | (258) | | **Total** | **20,740** | **20,201** | **(539)** | - The decrease in screens was due to the loss of three affiliates (**288 screens**) and net closures (**251 screens**)[136](index=136&type=chunk)[137](index=137&type=chunk) - The company believes its market coverage strengthens its competitive position against other advertising platforms[138](index=138&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section details financial performance for Q3 and YTD 2022, showing significant revenue growth across all categories, driven by increased attendance, leading to reduced operating and net losses - Total revenue increased by **71.9%** in Q3 2022 and **208.2%** year-to-date 2022[141](index=141&type=chunk)[156](index=156&type=chunk) - Operating loss decreased by **77.5%** in Q3 2022 and **72.3%** year-to-date 2022[131](index=131&type=chunk) - Net loss attributable to NCM, Inc. decreased by **41.4%** in Q3 2022 and **39.3%** year-to-date 2022[131](index=131&type=chunk) [Third Quarter of 2022 and Third Quarter of 2021](index=28&type=section&id=Third%20Quarter%20of%202022%20and%20Third%20Quarter%20of%202021) Q3 2022 saw total revenue increase by **71.9%** to **$54.5 million**, driven by a **40.8%** rise in theater attendance and higher national advertising CPMs, leading to a reduced net loss Revenue by Category (in millions, with % change) | Category | Q3 2022 | Q3 2021 | $ Change | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | National advertising revenue | $39.7 | $22.6 | $17.1 | 75.7% | | Local and regional advertising revenue | $9.8 | $5.7 | $4.1 | 71.9% | | Founding member beverage concessionaire revenue | $5.0 | $3.4 | $1.6 | 47.1% | | **Total revenue** | **$54.5** | **$31.7** | **$22.8** | **71.9%** | - Total theater attendance increased by **40.8%** to **106.6 million** in Q3 2022[141](index=141&type=chunk) - National advertising CPMs increased by **34.5%** in Q3 2022[142](index=142&type=chunk) - Operating expenses increased by **$8.3 million** (**16.5%**), driven by a **$4.6 million** increase in theater access fees and revenue share to founding members[145](index=145&type=chunk)[148](index=148&type=chunk) - Net loss decreased by **$6.3 million**, from **$15.2 million** in Q3 2021 to **$8.9 million** in Q3 2022[155](index=155&type=chunk) [Nine months ended September 29, 2022 and September 30, 2021](index=30&type=section&id=Nine%20months%20ended%20September%2029%2C%202022%20and%20September%2030%2C%202021) Year-to-date 2022 total revenue surged by **208.2%** to **$157.5 million**, with attendance up **121.4%**, leading to a **$22.5 million** reduction in net loss despite increased operating expenses and impairment charges Revenue by Category (in millions, with % change) | Category | YTD 2022 | YTD 2021 | $ Change | % Change | | :------------------------------------------ | :------- | :------- | :------- | :------- | | National advertising revenue | $116.7 | $34.3 | $82.4 | 240.2% | | Local and regional advertising revenue | $26.4 | $10.8 | $15.6 | 144.4% | | Founding member beverage concessionaire revenue | $14.4 | $6.0 | $8.4 | 140.0% | | **Total revenue** | **$157.5** | **$51.1** | **$106.4** | **208.2%** | - Total theater attendance increased by **121.4%** to **306.8 million** year-to-date 2022[156](index=156&type=chunk) - National advertising CPMs increased by **31.6%** and utilization by **44.0%** year-to-date 2022[157](index=157&type=chunk) - Operating expenses increased by **$51.0 million** (**39.9%**), with theater access fees and revenue share to founding members increasing by **$31.4 million** (**101.3%**)[160](index=160&type=chunk)[162](index=162&type=chunk) - Impairment of long-lived assets increased by **$5.8 million** due to write-off of certain long-lived assets[166](index=166&type=chunk) - Net loss decreased by **$22.5 million**, from **$57.3 million** in YTD 2021 to **$34.8 million** in YTD 2022[170](index=170&type=chunk) [Known Trends and Uncertainties](index=33&type=section&id=Known%20Trends%20and%20Uncertainties) The company faces uncertainties from COVID-19, macroeconomic factors, and the Cineworld Proceeding, with revenue streams like beverage and theater access fees subject to contractual terms and attendance levels - COVID-19 pandemic and macroeconomic factors continue to impact business, with attendance below historical levels[171](index=171&type=chunk)[172](index=172&type=chunk) - Regal's bankruptcy (Cineworld Proceeding) and motion to reject the ESA create uncertainty and potential material negative impact[173](index=173&type=chunk) - Beverage revenue is subject to contractual increases (**2.0% annually** for Cinemark and Regal) and attendance levels[174](index=174&type=chunk) - Theater access fees increase by **8%** every five years for patron-based fees and **5%** annually for digital screen fees[175](index=175&type=chunk) - Platinum Spot revenue share is based on a percentage of revenue generated, subject to a minimum average CPM[176](index=176&type=chunk) [Financial Condition and Liquidity](index=33&type=section&id=Financial%20Condition%20and%20Liquidity) Cash balances fluctuate due to seasonality and debt, with liquidity managed through cost-saving measures and additional debt, but substantial doubt about going concern persists due to maturing credit facilities and covenant non-compliance - Cash balances fluctuate due to seasonality, receivables, operating expenditures, and debt payments[178](index=178&type=chunk) - Cost-saving measures include reducing payroll (**44%** headcount reduction), curtailing non-essential expenditures, temporarily suspending 401K match, and decreasing/suspending dividends[179](index=179&type=chunk)[182](index=182&type=chunk) - NCM LLC drew down **$110.0 million** on its revolving credit facility in March 2020 and **$50.0 million** on a new facility in January 2022 to fund operations[180](index=180&type=chunk) - The company has **$217.0 million** in revolving credit facilities maturing on June 20, 2023, and does not have sufficient liquidity to repay the full balance, raising substantial doubt about its ability to continue as a going concern[184](index=184&type=chunk) Summary of Financial Liquidity (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Cash, cash equivalents and marketable securities | $74.8 | $102.5 | | NCM LLC revolving credit facility availability | $6.8 | $6.8 | | **Total liquidity** | **$81.6** | **$109.3** | [Sources of Capital and Capital Requirements](index=36&type=section&id=Sources%20of%20Capital%20and%20Capital%20Requirements) NCM, Inc. relies on NCM LLC's cash distributions and its own cash, while NCM LLC depends on operating cash flows and its revolving credit facility, with distributions negatively impacted by Credit Agreement amendments - NCM, Inc.'s primary liquidity source is quarterly available cash distributions from NCM LLC and existing cash balances (**$74.8 million** as of Sep 29, 2022)[190](index=190&type=chunk) - NCM LLC's primary liquidity sources are operating cash flows, revolving credit facility availability, and cash on hand[190](index=190&type=chunk) - Available cash distributions to NCM LLC's members were approximately negative **$41.3 million** for the nine months ended September 29, 2022, with NCM, Inc.'s share being negative **$19.6 million**[192](index=192&type=chunk) - No available cash distributions were made for Q1, Q2, or Q3 2022, and negative amounts are expected to be netted against future positive distributions after the extended covenant waiver holiday[192](index=192&type=chunk) - The company intends to distribute substantially all free cash flow to stockholders through dividends, subject to Board discretion and Credit Agreement restrictions[193](index=193&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) The company refers to its annual report for critical accounting policies, noting no significant changes as of September 29, 2022 - No significant changes in critical accounting policies as of September 29, 2022[194](index=194&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2019-12 and considered ASU 2020-04, neither of which had a material impact, and no other recent pronouncements are expected to be material - Adoption of ASU 2019-12 (Income Taxes) had no material impact[45](index=45&type=chunk) - LIBOR transition (ASU 2020-04) had no material impact[48](index=48&type=chunk) - No other recently issued accounting pronouncements are expected to have a material impact[49](index=49&type=chunk)[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, with **47%** of borrowings at variable rates, where a **100-basis point** fluctuation impacts annual cash interest expense by **$5.3 million** - Primary market risk is interest rate risk, affecting variable-rate debt[196](index=196&type=chunk) - **47%** of total borrowings bear interest at variable rates[189](index=189&type=chunk)[196](index=196&type=chunk) - A **100-basis point** fluctuation in interest rates would change annual cash interest expense by approximately **$5.3 million**[196](index=196&type=chunk) - Rising Federal Reserve interest rates in 2022 have increased the company's interest rate risk[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 29, 2022, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 29, 2022[200](index=200&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended September 29, 2022[202](index=202&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Regal Cinemas, Inc. filed for Chapter 11 bankruptcy and moved to reject its ESA with NCM LLC, which NCM LLC is challenging with a complaint seeking declaratory relief and an injunction - Regal Cinemas, Inc. (a founding member) filed for Chapter 11 bankruptcy and moved to reject its ESA with NCM LLC[204](index=204&type=chunk) - NCM LLC filed a complaint against Regal seeking declaratory relief and an injunction to prevent breaches of exclusivity, non-compete, and confidentiality provisions[204](index=204&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from the potential rejection or renegotiation of the ESA with Regal due to its Chapter 11 bankruptcy, and substantial doubt about its going concern ability if debt maturities are not extended or financing secured - The ESA with Regal, a founding member in bankruptcy, may be rejected, renegotiated, or deemed unenforceable, potentially having a materially negative impact on operations or financial condition[207](index=207&type=chunk) - Regal's plans to optimize theaters could lead to closures or removals from NCM's network, reducing advertising impressions and revenue[208](index=208&type=chunk) - Failure to extend maturity dates of Revolving Credit Facilities (**$217.0 million** due June 20, 2023) or obtain additional financing raises substantial doubt about the company's ability to continue as a going concern[209](index=209&type=chunk) - A failure to comply with covenants or repay debt could lead to an event of default and acceleration of all outstanding debt, which the company cannot repay with current liquidity[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported unregistered sales of **2,074** equity shares purchased from employees for tax withholding at an average price of **$1.65 per share** between July and September 2022 Shares Purchased for Tax Withholding | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------------------- | :----------------------------- | :--------------------------- | | July 29, 2022 through September 1, 2022 | 2,074 | $1.65 | [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[215](index=215&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[216](index=216&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable at book value on November 3, 2022, via a cash payment - NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable on November 3, 2022, for a cash payment equal to book value[217](index=217&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certifications, and XBRL taxonomy documents - Exhibit 10.2: Form of Receivable Sales Agreement, dated November 3, 2022, between NCM LLC and NCM, Inc.[218](index=218&type=chunk) - Includes Rule 13a-14(a) Certifications of CEO and CFO (Exhibits 31.1, 31.2)[218](index=218&type=chunk) SIGNATURES [Signatures](index=42&type=section&id=Signatures) The report is signed by Thomas F. Lesinski (CEO) and Ronnie Y. Ng (CFO) on November 7, 2022, certifying its submission - Signed by Thomas F. Lesinski (CEO) and Ronnie Y. Ng (CFO) on November 7, 2022[222](index=222&type=chunk)
National CineMedia(NCMI) - 2022 Q2 - Earnings Call Transcript
2022-08-09 02:55
National CineMedia, Inc. (NASDAQ:NCMI) Q2 2022 Earnings Conference Call August 8, 2022 5:00 PM ET Company Participants Dan Dorenkamp - Finance Director Tom Lesinski - Chief Executive Officer Ronnie Ng - Chief Financial Officer Conference Call Participants Eric Wold - B. Riley Securities Jim Goss - Barrington Research Operator Good day, and welcome to the National CineMedia, Inc. Q2 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. ...
National CineMedia(NCMI) - 2022 Q2 - Quarterly Report
2022-08-08 20:14
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________ FORM 10-Q ____________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33296 _____________________________________________ ...
National CineMedia(NCMI) - 2022 Q1 - Earnings Call Transcript
2022-05-10 03:06
National CineMedia, Inc. (NASDAQ:NCMI) Q1 2022 Earnings Conference Call May 9, 2022 5:00 PM ET Company Participants Dan Dorenkamp - Finance Director Ronnie Ng - CFO Tom Lesinski - CEO Conference Call Participants Eric Wold - B. Riley Mike Hickey - Benchmark Company Jim Goss - Barrington Research Operator Greetings, and welcome to National CineMedia Incorporated Q1, 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the for ...
National CineMedia(NCMI) - 2022 Q1 - Quarterly Report
2022-05-09 20:21
[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of income and comprehensive income, cash flows, and equity/(deficit), along with detailed notes explaining the company's business, accounting policies, revenue recognition, loss per share, intangible assets, related party transactions, borrowings, income taxes, commitments, contingencies, fair value measurements, and a subsequent event [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | Metric | March 31, 2022 (in millions) | December 30, 2021 (in millions) | | :----- | :--------------------------- | :------------------------------ | | Total Assets | $821.6 | $817.4 | | Total Liabilities | $1,243.0 | $1,200.9 | | Total Equity/(Deficit) | $(421.4) | $(383.5) | | Cash and cash equivalents | $113.8 | $101.2 | | Receivables, net | $43.0 | $53.0 | | Long-term debt, net | $1,143.3 | $1,094.3 | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | Change (YoY) | | :----- | :---------------------------------------------- | :--------------------------------------------- | :----------- | | Revenue | $35.9 | $5.4 | +$30.5 | | Operating Loss | $(22.5) | $(28.3) | +$5.8 | | Non-Operating Expenses | $23.5 | $13.7 | +$9.8 | | Consolidated Net Loss | $(46.0) | $(42.0) | $(4.0) | | Net Loss Attributable to NCM, Inc. | $(25.2) | $(19.4) | $(5.8) | | Basic EPS | $(0.31) | $(0.25) | $(0.06) | | Diluted EPS | $(0.31) | $(0.25) | $(0.06) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | | :----- | :---------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(23.6) | $(25.0) | | Net cash used in investing activities | $(0.7) | $(2.0) | | Net cash provided by financing activities | $36.9 | $37.4 | | Change in cash and cash equivalents | $12.6 | $10.4 | | Cash and cash equivalents at end of period | $113.8 | $190.7 | - Cash paid for interest increased to **$15.6 million** in Q1 2022 from **$10.9 million** in Q1 2021[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Equity/(Deficit)](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity%2F%28Deficit%29) | Metric | December 30, 2021 (in millions) | March 31, 2022 (in millions) | | :----- | :------------------------------ | :--------------------------- | | Total Equity/(Deficit) | $(383.5) | $(421.4) | | NCM, Inc. Stockholders' Equity/(Deficit) | $(526.7) | $(552.1) | | Noncontrolling interests | $143.2 | $130.7 | - Cash dividends declared were **$4.2 million** for the three months ended March 31, 2022, and **$4.5 million** for the three months ended April 1, 2021[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. THE COMPANY](index=9&type=section&id=Note%201.%20THE%20COMPANY) - NCM operates the largest cinema advertising network in the U.S., selling advertising under long-term exhibitor service agreements (ESAs) with founding members (AMC, Regal, Cinemark) and third-party network affiliates[26](index=26&type=chunk) - The COVID-19 pandemic significantly impacted the business, with in-theater advertising revenue remaining below historical levels in Q1 2022 despite resumed major motion picture releases and increased attendance since Q3 2021[27](index=27&type=chunk) - Weighted average remaining term of ESAs with founding members is approximately **17.5 years**, and with network affiliates is **15.2 years** as of March 31, 2022[28](index=28&type=chunk) - NCM, Inc. owned **47.4%** of NCM LLC common membership units as of March 31, 2022, with founding members Regal (**23.7%**), Cinemark (**25.4%**), and AMC (**3.5%**) holding the remainder[29](index=29&type=chunk) [Note 2. REVENUE FROM CONTRACTS WITH CUSTOMERS AND ACCOUNTS RECEIVABLE](index=11&type=section&id=Note%202.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS%20AND%20ACCOUNTS%20RECEIVABLE) - Revenue is derived from advertising in the Noovie® pre-show, Lobby Entertainment Network (LEN), lobby promotions, and online/mobile advertising platforms[45](index=45&type=chunk) - The company defers revenue associated with "make-good" provisions until advertising airs or the make-good period expires[46](index=46&type=chunk) | Revenue Category | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | | :--------------- | :---------------------------------------------- | :--------------------------------------------- | | National advertising revenue | $26.3 | $3.2 | | Local and regional advertising revenue | $6.1 | $1.7 | | Founding member advertising revenue from beverage concessionaire agreements | $3.5 | $0.5 | | Total revenue | $35.9 | $5.4 | - Revenue recognized in Q1 2022 from the Deferred Revenue balance as of December 30, 2021, was **$4.5 million**[50](index=50&type=chunk) [Note 3. LOSS PER SHARE](index=12&type=section&id=Note%203.%20LOSS%20PER%20SHARE) | Metric | Three Months Ended March 31, 2022 | Three Months Ended April 1, 2021 | | :----- | :-------------------------------- | :------------------------------- | | Net loss attributable to NCM, Inc. (in millions) | $(25.2) | $(19.4) | | Basic Loss per NCM, Inc. share | $(0.31) | $(0.25) | | Diluted Loss per NCM, Inc. share | $(0.31) | $(0.25) | | Basic Weighted Average Shares Outstanding | 81,040,652 | 78,481,355 | | Diluted Weighted Average Shares Outstanding | 81,040,652 | 78,481,355 | - **86,233,848** and **84,427,289** weighted average exchangeable NCM LLC common units for Q1 2022 and Q1 2021, respectively, were excluded from diluted EPS as they were anti-dilutive[54](index=54&type=chunk) [Note 4. INTANGIBLE ASSETS](index=13&type=section&id=Note%204.%20INTANGIBLE%20ASSETS) - Intangible assets consist of contractual rights to provide services in founding members' and network affiliates' theaters, amortized over their useful lives[55](index=55&type=chunk) - In Q1 2022, NCM LLC issued **6,483,893** common membership units and reduced **2,342,997** units, resulting in a net **$10.4 million** increase to intangible assets[57](index=57&type=chunk)[59](index=59&type=chunk) - A reduction of **$0.2 million** to net intangible assets was recorded in Q1 2022 related to other encumbered theater payments[61](index=61&type=chunk) [Note 5. RELATED PARTY TRANSACTIONS](index=14&type=section&id=Note%205.%20RELATED%20PARTY%20TRANSACTIONS) - AMC's ownership in NCM LLC was **3.5%** as of March 31, 2022, and it is no longer considered a related party for certain accounting purposes but remains a party to key agreements[62](index=62&type=chunk) | Metric (in millions) | Three Months Ended March 31, 2022 | Three Months Ended April 1, 2021 | | :------------------- | :-------------------------------- | :------------------------------- | | Beverage concessionaire revenue (related parties) | $2.8 | $0.4 | | Theater access fee and revenue share to founding members (related parties) | $12.8 | $1.3 | - Mandatory distributions of available cash by NCM LLC to its members were calculated as negative **$26.3 million** for Q1 2022, meaning no payment will be made, and negative amounts will be netted against future positive distributions[70](index=70&type=chunk) - Amounts due to related party founding members, net, were **$8.4 million** as of March 31, 2022, primarily for theater access fees and revenue share[71](index=71&type=chunk) [Note 6. BORROWINGS](index=17&type=section&id=Note%206.%20BORROWINGS) | Borrowing Type | March 31, 2022 (in millions) | December 30, 2021 (in millions) | Maturity Date | Interest Rate (March 31, 2022) | | :------------- | :--------------------------- | :------------------------------ | :------------ | :----------------------------- | | Revolving credit facility 2018 | $167.0 | $167.0 | June 20, 2023 | 4.50% (weighted-average) | | Revolving credit facility 2022 | $50.0 | — | June 20, 2023 | 9.11% (weighted-average) | | Term loans - first tranche | $259.9 | $261.2 | June 20, 2025 | 5.00% | | Term loans - second tranche | $49.5 | $49.8 | December 20, 2024 | 9.00% | | Senior secured notes due 2028 | $400.0 | $400.0 | April 15, 2028 | 5.875% | | Senior unsecured notes due 2026 | $230.0 | $230.0 | August 15, 2026 | 5.750% | | Total borrowings | $1,156.4 | $1,108.0 | | | - NCM LLC entered into a Third Amendment to its Credit Agreement on January 5, 2022, suspending consolidated net total leverage and senior secured leverage financial covenants through December 29, 2022, and setting new ratios thereafter[78](index=78&type=chunk) - A new **$50.0 million** secured revolving credit facility was entered into on January 5, 2022, fully funded, with a cash interest rate of term SOFR plus **8.00%** (**1.00%** floor) and maturity on June 20, 2023[85](index=85&type=chunk) [Note 7. INCOME TAXES](index=19&type=section&id=Note%207.%20INCOME%20TAXES) - Income tax expense was **$0.0 million** for both Q1 2022 and Q1 2021, resulting in a **0.0%** effective tax rate[89](index=89&type=chunk) - The company maintains a full valuation allowance on its net deferred tax assets, indicating uncertainty about realizing their benefits[89](index=89&type=chunk) [Note 8. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=Note%208.%20COMMITMENTS%20AND%20CONTINGENCIES) - No legal proceedings are expected to have a material adverse effect on operating results or financial condition[90](index=90&type=chunk) | Metric (in millions) | March 31, 2022 | | :------------------- | :------------- | | ROU assets (facilities) | $18.3 | | Short-term lease liabilities (facilities) | $2.2 | | Long-term lease liabilities (facilities) | $19.8 | | Weighted average remaining lease term (facilities) | 7.3 years | | Weighted average annual discount rate | 7.4% | - ESAs and network affiliate agreements are treated as short-term leases (less than one month) under ASC 842, with amortization of related intangible assets recognized as lease expense[94](index=94&type=chunk) - Maximum potential future payments for minimum revenue guarantees to network affiliates is **$121.5 million** over remaining terms[99](index=99&type=chunk) [Note 9. FAIR VALUE MEASUREMENTS](index=21&type=section&id=Note%209.%20FAIR%20VALUE%20MEASUREMENTS) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[102](index=102&type=chunk)[103](index=103&type=chunk) | Borrowing Type | March 31, 2022 Carrying Value (in millions) | March 31, 2022 Fair Value (in millions) | December 30, 2021 Carrying Value (in millions) | December 30, 2021 Fair Value (in millions) | | :------------- | :------------------------------------------ | :-------------------------------------- | :--------------------------------------------- | :------------------------------------------- | | Term loans - first tranche | $259.9 | $233.9 | $261.2 | $236.4 | | Term loans - second tranche | $49.5 | $46.8 | $49.8 | $48.1 | | Notes due 2026 | $230.0 | $165.6 | $230.0 | $179.4 | | Notes due 2028 | $400.0 | $349.0 | $400.0 | $357.0 | | Asset Type (in millions) | March 31, 2022 Fair Value | Level 1 | Level 2 | Level 3 | | :----------------------- | :------------------------ | :------ | :------ | :------ | | Cash equivalents | $33.1 | $33.1 | — | — | | Short-term marketable securities | $0.3 | — | $0.3 | — | | Long-term marketable securities | $1.0 | — | $1.0 | — | | Total assets | $34.4 | $33.1 | $1.3 | — | [Note 10. SUBSEQUENT EVENT](index=23&type=section&id=Note%2010.%20SUBSEQUENT%20EVENT) - A cash dividend of **$0.03 per share** (approx. **$2.4 million**) was declared on May 9, 2022, payable June 7, 2022[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the first quarter of 2022 compared to 2021, covering business overview, recent developments, revenue and expense analysis, known trends, liquidity, capital resources, and critical accounting policies [Overview](index=24&type=section&id=Overview) - NCM is America's Movie Network, the largest cinema advertising network in the U.S., deriving revenue from advertising in its Noovie® pre-show, LEN, and digital properties[117](index=117&type=chunk)[119](index=119&type=chunk) - As of March 31, 2022, approximately **57%** of the network presents the new Noovie pre-show format with Post-Showtime advertising inventory, while the remaining **43%** presents the Classic Noovie pre-show[118](index=118&type=chunk) - The company monitors key operating metrics including revenue, Adjusted OIBDA, advertising inventory utilization, national/regional advertising pricing (CPM), local advertising rate per theater per week, and advertising revenue per attendee[120](index=120&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) - In-theater advertising revenue for Q1 2022 remained below historical levels due to a lag between attendee recovery and advertiser return, despite all network theaters being open since Q3 2021[123](index=123&type=chunk) - The company significantly reduced payroll-related costs through temporary measures and a **45%** headcount reduction as of March 31, 2022, compared to pre-pandemic levels[124](index=124&type=chunk) - On January 5, 2022, NCM LLC entered into a Third Amendment to its Credit Agreement, suspending certain financial covenants through December 29, 2022, and establishing new leverage ratios for subsequent quarters[125](index=125&type=chunk) - A new **$50.0 million** secured revolving credit facility was funded on January 5, 2022, with a maturity date of June 20, 2023[126](index=126&type=chunk) [Summary Historical and Operating Data](index=25&type=section&id=Summary%20Historical%20and%20Operating%20Data) | Metric | Q1 2022 (in millions) | Q1 2021 (in millions) | % Change (YoY) | | :----- | :-------------------- | :-------------------- | :------------- | | Revenue | $35.9 | $5.4 | 564.8% | | Operating loss | $(22.5) | $(28.3) | (20.5)% | | Net loss attributable to NCM, Inc. | $(25.2) | $(19.4) | 29.9% | | Adjusted OIBDA | $(6.8) | $(16.2) | (58.0)% | | Adjusted OIBDA margin | (18.9)% | (300.0)% | 281.1% | | Total theater attendance | 76.0 | 13.8 | 450.7% | - Adjusted OIBDA is a non-GAAP measure used by management to evaluate operating performance, excluding depreciation, amortization of intangibles, non-cash share-based compensation, impairment of long-lived assets, and sales force reorganization costs[129](index=129&type=chunk) | Network Screens | December 30, 2021 | March 31, 2022 | Change | | :-------------- | :---------------- | :------------- | :----- | | Founding Members | 16,436 | 16,361 | (75) | | Network Affiliates | 4,304 | 4,244 | (60) | | Total | 20,740 | 20,605 | (135) | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) [First Quarter of 2022 and First Quarter of 2021](index=27&type=section&id=First%20Quarter%20of%202022%20and%20First%20Quarter%20of%202021) - Total revenue increased by **564.8%** to **$35.9 million** in Q1 2022, compared to **$5.4 million** in Q1 2021[134](index=134&type=chunk) | Revenue Category | Q1 2022 (in millions) | Q1 2021 (in millions) | $ Change (YoY) | % Change (YoY) | | :--------------- | :-------------------- | :-------------------- | :------------- | :------------- | | National advertising revenue | $26.3 | $3.2 | $23.1 | 721.9% | | Local and regional advertising revenue | $6.1 | $1.7 | $4.4 | 258.8% | | Founding member beverage revenue | $3.5 | $0.5 | $3.0 | 600.0% | | Total revenue | $35.9 | $5.4 | $30.5 | 564.8% | | Revenue per Attendee | Q1 2022 | Q1 2021 | % Change (YoY) | | :------------------- | :------ | :------ | :------------- | | National advertising revenue per attendee | $0.346 | $0.232 | 49.1% | | Local and regional advertising revenue per attendee | $0.080 | $0.123 | (35.0)% | | Total revenue per attendee | $0.472 | $0.391 | 20.7% | | Total theater attendance (in millions) | 76.0 | 13.8 | 450.7% | - Total operating expenses increased by **$24.7 million** (**73.3%**) to **$58.4 million** in Q1 2022, primarily due to higher advertising affiliate expense, increased theater access fees, and personnel costs[139](index=139&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) - Non-operating expenses increased by **$9.8 million** (**71.5%**) to **$23.5 million**, mainly due to a **$7.9 million** increase in loss on re-measurement of the TRA payable and a **$2.5 million** increase in interest on borrowings[147](index=147&type=chunk) - Net loss attributable to NCM, Inc. increased by **$5.8 million** to **$(25.2) million** in Q1 2022, driven by higher non-operating expenses, partially offset by a decrease in operating loss[148](index=148&type=chunk) [Known Trends and Uncertainties](index=30&type=section&id=Known%20Trends%20and%20Uncertainties) - The COVID-19 pandemic's impact on future periods remains uncertain, with attendance-based fees reduced when attendance is lower than historical levels[149](index=149&type=chunk)[150](index=150&type=chunk) - Beverage revenue pricing for founding members is based on the greater of previous year's CPM or unaffiliated third-party CPM for AMC, while Cinemark and Regal's beverage supplier pricing increases at a fixed rate of **2.0%** annually[151](index=151&type=chunk) - Theater access fees to founding members are composed of fixed payments per patron (increasing **8%** every five years, next in 2027) and per digital screen (increasing **5%** annually)[152](index=152&type=chunk)[153](index=153&type=chunk) - Cinemark and Regal receive a percentage of revenue from Platinum Spots, subject to a specified minimum average CPM if multiple advertisers run concurrently[154](index=154&type=chunk) [Financial Condition and Liquidity](index=31&type=section&id=Financial%20Condition%20and%20Liquidity) - Liquidity is affected by seasonality, receivables collection, operating expenses, available cash payments to founding members, debt payments, income taxes, and dividends[155](index=155&type=chunk) - The company implemented cost-saving measures including reduced Board compensation, curtailed non-essential operating/capital expenditures, suspended 401K match, managed vendor costs, decreased quarterly dividend, and active cash management[157](index=157&type=chunk) | Metric (in millions) | March 31, 2022 | December 30, 2021 | April 1, 2021 | | :------------------- | :------------- | :---------------- | :------------ | | Cash, cash equivalents and marketable securities | $115.1 | $102.5 | $192.2 | | NCM LLC revolving credit facility availability | $6.8 | $6.8 | $5.6 | | Total liquidity | $121.9 | $109.3 | $197.8 | - As of March 31, 2022, NCM LLC held **$76.2 million** in cash, not available for NCM, Inc. dividends or TRA payments[162](index=162&type=chunk) - Management believes the company can meet operating and debt obligations for the next year based on current financial position and forecasted cash flows[159](index=159&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) - No significant changes to critical accounting policies as of March 31, 2022, from those disclosed in the annual report on Form 10-K for December 30, 2021[168](index=168&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) - Adoption of recently issued accounting pronouncements is not expected to have a material impact on the unaudited Condensed Consolidated Financial Statements[169](index=169&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, affecting its variable-rate revolving credit facilities and term loans, with a 100-basis point fluctuation impacting annual cash interest expense by approximately $5.3 million - Primary market risk is interest rate risk, affecting variable-rate revolving credit facilities and term loans[170](index=170&type=chunk) - A **100-basis point** fluctuation in market interest rates would increase/decrease annual cash interest expense by approximately **$5.3 million** on **$217.0 million** in revolving credit balances and **$309.4 million** in term loans outstanding as of March 31, 2022[170](index=170&type=chunk) - Historically low interest rates as of March 31, 2022, reduced interest rate risk, but an increase would raise this risk[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2022, concluding they were effective with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[173](index=173&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2022[176](index=176&type=chunk) [PART II — OTHER INFORMATION](index=35&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings in the ordinary course of business but does not anticipate any material adverse effect on its operating results or financial condition - No legal proceedings are expected to have a material adverse effect on operating results or financial condition[178](index=178&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the annual report on Form 10-K for the fiscal year ended December 30, 2021 - No material changes to risk factors from the annual report on Form 10-K filed March 3, 2022[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on shares delivered to the company from restricted stock upon vesting to cover employees' tax withholding obligations | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----- | :------------------------------- | :--------------------------- | | December 31, 2021 through January 27, 2022 | — | $— | | January 28, 2022 through February 24, 2022 | 18,773 | $3.17 | | February 25, 2022 through March 31, 2022 | 42,672 | $2.97 | [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities[182](index=182&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[183](index=183&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No other information was reported - None[184](index=184&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to the Bylaws and Certificate of Incorporation, and amendments to the Credit Agreement and a new Revolving Credit Agreement - Key exhibits include amendments to Bylaws and Certificate of Incorporation (May 4, 2022), Amendment No. 3 to the Credit Agreement (January 5, 2022), and a new Revolving Credit Agreement (January 5, 2022)[186](index=186&type=chunk) [Signatures](index=37&type=section&id=Signatures) The report was signed by Thomas F. Lesinski, Chief Executive Officer, and Ronnie Y. Ng, Chief Financial Officer, on May 9, 2022 - Report signed by CEO Thomas F. Lesinski and CFO Ronnie Y. Ng on May 9, 2022[192](index=192&type=chunk)
National CineMedia(NCMI) - 2021 Q4 - Earnings Call Transcript
2022-03-04 00:51
National CineMedia, Inc. (NASDAQ:NCMI) Q4 2021 Earnings Conference Call March 3, 2022 5:00 PM ET Company Participants Ronnie Ng - CFO Tom Lesinski - CEO Conference Call Participants Eric Wold - B. Riley Securities Operator 00:05 Good day, and welcome to the National CineMedia, Inc. Q4 and Full-Year 2021 Earnings Conference Call. Today's conference is being recorded. 00:13 At this time, I'd like to turn the conference over to Mr. Ronnie Ng, CFO. Please go ahead, sir. Ronnie Ng 00:18 Thank you. Good afternoon ...